Facts of the Case

The petitioner, M/s M.G. Shahani and Company (Bombay) Pvt. Ltd., approached the High Court of Kerala in relation to the issue of availing Transitional Credit while migrating to the Goods and Services Tax regime.

The dispute arose in the broader context of difficulties faced by taxpayers in filing or revising declarations for claiming transitional credit through FORM GST TRAN-1 and FORM GST TRAN-2 during migration from the pre-GST indirect tax system to the GST framework.

During the hearing, it was not disputed before the High Court that the issue raised in the writ petition had been completely addressed by the judgment of the Supreme Court in Union of India & Anr. vs Filco Trade Centre Pvt. Ltd. & Anr., 2022 SCC OnLine SC 912.

Accordingly, the High Court considered the binding directions issued by the Supreme Court concerning reopening of the common GST portal, filing or revision of TRAN-1 and TRAN-2 forms, verification of transitional credit claims, and reflection of allowed credit in the Electronic Credit Ledger.

Issues Involved

The principal issues involved were:

  1. Whether the petitioner could avail transitional credit while migrating to the GST regime.
  2. Whether taxpayers facing difficulties in filing or revising declarations for transitional credit could be permitted to file or revise FORM GST TRAN-1 and FORM GST TRAN-2.
  3. Whether the Supreme Court’s directions in Union of India & Anr. vs Filco Trade Centre Pvt. Ltd. & Anr. applied to the petitioner’s case.
  4. Whether the benefit of filing or revising transitional credit forms was available irrespective of whether:
    • the taxpayer had earlier filed a writ petition before a High Court; or
    • the taxpayer’s case had been decided by the Information Technology Grievance Redressal Committee (ITGRC).
  5. Whether the concerned tax officers were required to verify the transitional credit claim on merits after granting reasonable opportunity to the taxpayer.

Petitioner’s Arguments

The petitioner’s case related to its entitlement to avail Transitional Credit during migration to the GST regime.

The petitioner sought appropriate relief concerning the filing and/or availing of transitional credit in circumstances where taxpayers had faced difficulties in filing or revising the relevant declarations.

The petitioner’s claim fell within the scope of the issue subsequently and comprehensively addressed by the Supreme Court in Union of India & Anr. vs Filco Trade Centre Pvt. Ltd. & Anr.

In view of the Supreme Court’s binding directions, the petitioner’s transitional credit claim was required to receive the same treatment and procedural opportunity made available to other aggrieved registered assessees.

Respondents’ Arguments / Position

The judgment records that it was not in dispute before the High Court that the issue raised in the writ petition stood completely addressed by the Supreme Court judgment in Union of India & Anr. vs Filco Trade Centre Pvt. Ltd. & Anr., 2022 SCC OnLine SC 912.

Therefore, the controversy did not require a separate adjudication inconsistent with or beyond the framework already prescribed by the Supreme Court.

The matter was consequently governed by the directions issued in the Filco Trade Centre case.

Court Order / Findings

The High Court of Kerala held that the directions issued by the Supreme Court in Union of India & Anr. vs Filco Trade Centre Pvt. Ltd. & Anr. would apply to the petitioner’s case as well.

The High Court noted the following directions issued by the Supreme Court:

  1. Opening of GST Common Portal:
    GSTN was directed to open the common portal for filing the concerned forms for availing transitional credit through TRAN-1 and TRAN-2 for two months, from 01 September 2022 to 31 October 2022.
  2. Filing or Revision by Aggrieved Registered Assessees:
    Any aggrieved registered assessee was permitted to file the relevant form or revise an already filed form, irrespective of:
    • whether the taxpayer had filed a writ petition before a High Court; or
    • whether the taxpayer’s case had been decided by the Information Technology Grievance Redressal Committee (ITGRC).
  3. GSTN to Prevent Technical Glitches:
    GSTN was required to ensure that there were no technical glitches during the permitted period.
  4. Verification by Concerned Officers:
    The concerned officers were granted 90 days thereafter to verify the veracity of the transitional credit claim and pass appropriate orders on merits after granting an appropriate and reasonable opportunity to the concerned parties.
  5. Reflection in Electronic Credit Ledger:
    The transitional credit allowed after verification was required to be reflected in the taxpayer’s Electronic Credit Ledger.
  6. Guidelines by GST Council:
    If required, the GST Council could issue appropriate guidelines to field formations for scrutiny of transitional credit claims.

After reproducing and considering these binding directions, the High Court expressly held that the Supreme Court directions “shall apply to the case on hand as well.”

Accordingly, the writ petition was disposed of on the above terms.

Important Clarification

The most important clarification arising from this judgment is that the High Court did not independently adjudicate or quantify the petitioner’s transitional credit claim on merits.

Instead, the Court applied the procedural and substantive framework laid down by the Supreme Court in Union of India & Anr. vs Filco Trade Centre Pvt. Ltd. & Anr.

Therefore:

  • The judgment should not be read as automatic approval of every transitional credit claim.
  • The opportunity to file or revise TRAN-1/TRAN-2 was made available under the Supreme Court’s directions.
  • The concerned officers retained the authority and obligation to verify the veracity of the claim/transitional credit.
  • Appropriate orders were required to be passed on merits.
  • The taxpayer was entitled to an appropriate reasonable opportunity during the verification process.
  • Only the allowed transitional credit was to be reflected in the Electronic Credit Ledger.

This distinction is significant because the Supreme Court’s directions provided a procedural opportunity for taxpayers to lodge or revise claims, while preserving the tax authorities’ power to scrutinise and decide the claims on merits.

Sections / Legal Provisions Involved

The dispute concerns the statutory framework governing migration of accumulated input tax credit into the Goods and Services Tax regime, particularly:

  • Section 140 of the Central Goods and Services Tax Act, 2017 — Transitional arrangements for input tax credit.
  • Rule 117 of the Central Goods and Services Tax Rules, 2017 — Filing of declaration in FORM GST TRAN-1 for transitional credit.
  • FORM GST TRAN-1 — Declaration for carrying forward eligible transitional credit into the GST regime.
  • FORM GST TRAN-2 — Declaration relevant to specified transitional credit claims.
  • The legal principles and binding directions laid down by the Supreme Court in Union of India & Anr. vs Filco Trade Centre Pvt. Ltd. & Anr., 2022 SCC OnLine SC 912.

Link to Download the Order-https://mytaxexpert.co.in/uploads/1783488673_1428compressed.pdf

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